Wednesday, February 04, 2009

The Myth about Savings in US

I have heard lot of Indians in US including me telling at some point of time – “I will save some money in US and go back and settle in India”. I have seen only very few people who have actually done that. Why? The answer is very simple. In a fully capitalistic county like US it is too tough to save. Majority of the people are forced to live from pay check to pay check. 

Lot of Indians come to US not knowing that it is very tough to save in US. Once they are here soon they will find the harsh realities of life here. Here are a couple of observations I made during my stay in US. 

“We were better off in Middle East financially than here. We have only debts here and no saving”. This was what one of my friends who moved to US from Middle East told me other day. His family consisting of his wife and two kids moved to US two years back with a green card, thanks to his wife who is a nurse. Both left a well paid job in Middle East to pursue their dreams in the land of opportunities. 

In the Middle East they had company paid apartment to live, company paid transportation to and from work, a month of paid vacation, ticket for the entire family to go to India and back during vacation etc and on top of it you don’t pay any taxes. They were saving a lot and thought that if they land in US they could save more since they are going to earn in dollars – a myth lot of people have. 

Harsh realities struck the family from day one of their landing. One third of your salary goes as tax, another one third goes a rent to your apartment and after you pay monthly installment for your car there was nothing left to save. Send your kid to preschool and that will rip off your pocket. If even after that you save something it will all be gone by the time family of four go for an India trip and back. 

Another one that comes to my mind– one of my undergraduate class mates came to US one year back with his wife and kid. He knew that I am here for more than seven years and during the very first conversation I had with him after he landed him in US he was asking me “You might have saved at least 50 lakhs Indian rupees (approximately 100K USD) by now. He was telling me that he is planning to save over 60% of his salary and go back to India in another five years. He was planning so many things - to stay in a studio, use public transportation thus saving on buying a car, planning to convert his wife’s visa to a working visa so that she can also work and so forth. While he was letting me know all his dreams I interrupted him and told him – “Let us talk about this after six months”. After about three months he called me. He shifted from a studio to a two bed room apartment as studio was too small for a family of three; brought a new Honda Civic and was telling me that he couldn’t even save 20% of the salary. All I told him is “Welcome to US”. If I have told him the time he landed about all these he is not going to believe it. Now the harsh realities made him realize that he was living in a dream world. Now he has dropped the idea of going back and now in the long queue for Green Card and thus an American Citizen in the long run. 

Does that mean that you cannot save a lot in US? The answer is “Yes’ and “No”. If you are a bachelor it may be possible but once you have a family it is really tough. Most of the times your expenses will balance out or exceed the biweekly pay check and there is hardly anything left to save. 

Bottom Line – if your intention of coming to US is to save money and return back think again. Chances are that it is not going to happen as you don’t save enough to return. On the other hand if your intention of coming to US is to have a challenging environment where you can sharpen your skill, work on the latest and cutting edge technologies and get recognized for it, US is the place to be in.

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Blogger AJ said...

the following is an email forward I got:

As the dream of most parents I had acquired a degree in Software Engineer

and joined a company based in USA, the land of braves and opportunity. When

I arrived in the USA , it was as if a dream had come true.

Here at last I was in the place where I want to be. I decided I would be

staying in this country for about Five years in which time I would have

earned enough money to settle down in India .

My father was a government employee and after his retirement, the only

asset he could acquire was a decent one bedroom flat. I wanted to do some

thing more than him. I started feeling homesick and lonely as the time

passed. I used to call home and speak to my parents every week using cheap

international phone cards. Two years passed, two years of Burgers at

McDonald's and pizzas and discos and 2 years watching the foreign exchange

rate getting happy whenever the Rupeevalue went down.

Finally I decided to get married. Told my parents that I have only 10 days

of holidays and everything must be done within these 10 days. I got my

ticket booked in the cheapest flight. Was jubilant and was actually

enjoying hopping for gifts for all my friends back home.If I miss anyone

then there will be talks. After reaching home I spent home one week going

through all the photographs of girls and as the time was getting shorter I

was forced to select one candidate.

In-laws told me,to my surprise, that I would have to get married in 2-3

days, as I will not get anymore holidays. After the marriage, it was time

to return to USA , after giving some money to my parents and telling the

neighbors to look after them, we returned to USA .

My wife enjoyed this country for about two months and then she started

feeling lonely. The frequency of calling India increased to twice in a week

sometimes 3 times a week. Our savings started diminishing. After two more

years we started to have kids. Two lovely kids, a boy and a girl,were

gifted to us by the almighty. Every time I spoke to my parents, they asked

me to come to India so that they can see their grand-children.

Every year I decide to go to India . But part work part monetary conditions

prevented it. Years went by and visiting India was a distant dream. Then

suddenly one day I got a message that my parents were seriously sick. I

tried but I couldn't get any holidays and thus could not go to India . The

next message I got was my parents had passed away and as there was no one

to do the last rights the society members had done whatever they could. I

was depressed. My parents had passed away

without seeing their grand children.

After couple more years passed away, much to my children's dislike and my

wife's joy we returned to India to settle down. I started to look for a

suitable property, but to my dismay my savings were short and the property

prices had gone up during all these years. I had to return to the USA .

My wife refused to come back with me and my children refused to stay in

India . My 2 children and I returned to USA after promising my wife I would

be back for good after two years.

Time passed by, my daughter decided to get married to an American and my

son was happy living in USA . I decided that had enough and wound-up every

thing and returned to India . I had just enough money to buy a decent 02

bedroom flat in a well-developed locality. Now I am 60 years old and the

only time I go out of the flat is for the routine visit to the nearby

temple. My faithful wife has also left me and gone to the holy abode.

Sometimes I wondered was it worth all this? My father, even after staying

in India , had a house to his name and I too have the same nothing more.

I lost my parents and children for just ONE EXTRA BEDROOM.

Looking out from the window I see a lot of children dancing. This damned

cable TV has spoiled our new generation and these children are losing their

values and culture because of it. I get occasional cards from my children

asking I am alright. Well at least they remember me.

Now perhaps after I die it will be the neighbors again who will be

performing my last rights, God Bless them. But the question still remains

'was all this worth it?'

I am still searching for an answer................!!!!

February 04, 2009 5:52 AM  
Anonymous Anonymous said...

I don't think you are right about the saving potential, If you are wise and smart enough you can save money. and jst a note about the comments about Middle East (All that Glitters are not gold ) Though there is no Tax in Middle east especially Dubai the living expenses are shooting up
Take some time and talk to people from any country .. I mean any country in the world you will not find even a single man(Middle Class) who says ok I am saving well here.. so Drawbacks are Everywhere, you cant help it.
The right thing to do is get smart

February 04, 2009 7:07 PM  
Blogger Brijesh Nair said...

Anon@ 12.07 PM

The intent of the post was not to compare the saving potential in different countries/continents. I fully agree with you that if you are smart you can save also. But there are lots f people who come here with expectations of savings that are so impractical. I was addressing them.

February 04, 2009 7:27 PM  
Blogger USB said...

Rightly said, saving is a "Yes" & "No" situation. I've seen folks in my earlier company with family (mostly 1 kid) save at least 1000 to 2000$ per month, so they did achieve their dream of saving money. But it is difficult to really save all that much if you are single earner, two kids and maintain a decent living standard. Anyway middle class salaried folks are always short of money, right?

February 04, 2009 8:19 PM  
Anonymous V said...

this is another sooooper generalization of yours!....
I know ppl ppl who have saved enuf to buy houses in both india and in US...this is completely not true as always......

"if your intention of coming to US is to save money and return back think again. Chances are that it is not going to happen as you don’t save enough to return."

this statement is a bit too much.i know so many ppl who have done it! :)

February 04, 2009 9:26 PM  
Blogger Brijesh Nair said...

“Anyway middle class salaried folks are always short of money” – Correct observation. But a lot of middle class salaried folks come to US thinking that they could join upper class instantly once they land in US.

i don’t think I am making a generalization here. I am here for eight years and I know only very few people who have done that. At the same time I know a lot of people who came here with the intention of going back and postponing it just because they don’t have enough savings.

February 04, 2009 11:16 PM  
Anonymous Anonymous said...

I agree that in US you can save only if you live very pathetic life, then you are wasting your youth. Lots of desi count every penny they spend during the first year. Slowly they will start realizing that their standard of life is less than even their friends in india. They start opening up their wallet and start living a decent life. From then on they can forget the dream of going back to india and living a retired life. You are trapped in the US of A.

February 05, 2009 4:54 AM  
Blogger kalpanakasupa12 said...

This comment has been removed by a blog administrator.

February 05, 2009 10:47 AM  
Anonymous Anonymous said...

Again As I said before depends upon what you wanted to do , i know people who live as family with a decent salary managed to buy a house with 100 k Down just after being in US for 6 yrs, As the previous Anonymous told when people open up their wallet they dont realize where they should put a stop. see Even if you go to india everything is so expensive .. I almost fainted when i saw the commodity prices in india when I went there last .. so I dont think even a person in India with a average salary (So called middle class) can save anything after they buy a house (At this stage where mortgage rates are almost 14 % in India )

February 05, 2009 4:54 PM  
Anonymous Anu said...

Hey there, as someone who has been living in the US for the last nine years, I can definitely relate to it. My husband and I both earn six figure salaries, but between 9besides taxes, property payments and other living expenses) daycare costs, costs of bringing parents over for visits (aah, you missed that one, didnt ya) making a trip to India every two years, and helping parents out financially whenever they need it - you end up saving maybe 20-30% of your earnings? Does that make us well off? Yes. Does it make us rich - No way. Today, when apartments/property rates in big cities like Bangalore range from Rs. 30 to 40 lac, how does saving 100K make anyone rich.

There are definitely people who save a LOT more, but wihtout getting into a debate of what is right or wrong, life is also to be enjoyed. I know couples who scrimp and save, havent travelled anywhere in the U.S and yes, save a lot more than me. So it really comes to down to what your mantra in life.

February 05, 2009 6:32 PM  
Blogger Brijesh Nair said...

Anon @ 9.54 PM
Very true.

Anon @ 9.54 AM
I never believe that saving in India is easier and in fact I believe it is tougher compared to US. My point in this blog is that there is lot of people who believes that you can easily save a lot of money and become rich very fast if you are in US which is not true. That is the point of my blog.

That was exactly the point I want to make. You summed up what I want to convey very well.

February 06, 2009 12:33 AM  
Anonymous Anonymous said...

Hee Hee Hee.. To my understanding, buying houses in India and US is never the problem, especially when credit is available. But "Are those people debt-free?" or "Can they be debt-free today if they choose to?" is another Qn.

Like one of my good friends say "Exceptions can't be examples".. Brijesh does that sometimes and even writes blogs based on those exceptions but definitely not this time. :).. Good post, Brijesh..


February 07, 2009 12:15 AM  
Anonymous Anonymous said...

average savings in the descending order for a typical NRI Indian family-

First, Middle East
East Asia
Last, USA

February 13, 2009 4:18 PM  
Blogger Brijesh Nair said...

Anon @ 9:18 AM

the standard of life can be other way around.

February 14, 2009 6:37 PM  
Anonymous Anonymous said...

Money isn't everything. You cannot even compare the US to the middle East. Life in the US rocks.
Only those who appreciate freedom will realize this.

November 18, 2009 4:56 PM  
Anonymous Anonymous said...

Is it worth it even in India now?

Well, if you've got 10 years exp in IT, your salary should be in the range of $30000 to $45000, minus the tax. Most of it will be in the 33% tax bracket. Assuming you will have wife and kids.

The cost of a good 3BHK apartment in Bangalore is $160000 with a reputed builder. You can get one for half the price also in a stand alone building.

Considering that you'll pay for car, petrol, children's education, baby sitting, insurance, yearly visit to parents, you still land up saving about $200 to $600 a month. This isn't sufficent to even pay for the EMI of a good 3BHK apartment.

Ofcourse, you can compromise, rent low cost apartment, use a 2 wheeler, minimum servants, have a house wife and you can save much more. In general, it's only this category of people that I find have been able to buy apartments.

The advantage in US ofcourse is that if you go as a bachelor, you'll have much better savings to buy an aparment in India.

November 18, 2010 6:33 PM  
Anonymous Anonymous said...

It is just a matter of knowledge of managing money. If you cannot make money in US, you will not make it anywhere else. The social and financial model is US and Middle east are entirely different. People make their own choices about where they want to live and how they want to commute. It is about freedom. You can go out with a female friend for lunch without having 20000 eyes following you. If you can handle the freedom fine else be happy being in a state supported lifestyle.

November 13, 2011 3:19 PM  
Anonymous Anonymous said...

It all depends on what is your ultimate goal. Middle East is thee best as we can save and live a good life too. Savings I mean are great,

January 29, 2012 7:07 PM  

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